SouthernSun Asset Management launches real estate opportunity fund

Opalesque Industry Update - SouthernSun Asset Management, a research-driven investment management firm with 23 employees and more than $1.3 billion in assets under management, announced that it has hired the former management team of Mercury Investment Management, LLC, and incorporated all of the firm’s operations onto the SouthernSun platform. Earl Blankenship, a co-founder of the Mid-South office of CB Richard Ellis and former President and CEO of Mercury, will lead the firm’s real estate investment strategy. Joining SouthernSun with Mr. Blankenship are Jim Dorman, Stuart Harris and Garrott McClintock.

SouthernSun’s Founder, CEO, and CIO, Michael Cook, said, “I have known and admired Earl for many years, and believe that his proven ability to identify undervalued commercial real estate assets will meaningfully diversify and maximize value from the SouthernSun platform. More specifically, his addition to the team allows us to: 1) leverage our firm’s high-quality human capital, 2) diversify SouthernSun’s product offering with a non-correlated asset class and 3) capitalize on the burgeoning distress in the commercial real estate market. Moreover, by assimilating his team to focus on real estate, our existing equity investment team remains focused entirely on our core business, which is investing in our Small Cap, SMID Cap, and Focused Global strategies.”

“We have been conducting deep market reconnaissance for the past year to assess proper timing and structure for a fund,” Mr. Blankenship added. “Our experience managing workouts and restructurings for distressed properties in mid-tier markets provides a unique and often overlooked niche opportunity. The alignment with SouthernSun helps ensure we have the people, process, and strategy to succeed.”

The Fund is seeking to acquire financially distressed office, multi-family, and retail assets in mid-market urban centers at discounted prices resulting from deteriorated market conditions. The real estate team is overseeing the management of the assets to stabilize and improve rental income and, ultimately, to sell into improving capital markets at non-distressed pricing.

According to a report issued by the Congressional Oversight Panel, about $1.4 trillion in commercial real estate loans will reach the end of their terms between 2010 and 2014, on nearly half of which the borrower owes more than the underlying property is currently worth. Increased vacancy rates have exerted downward pressure on the value of commercial properties. These market forces have created a buying opportunity for investors with liquidity.